IT Contract in Germany, work based mostly out of home in UK

[borderreiver]

Many thanks for your response.

Unless there's some special arrangement for agencies that I've not heard of (I've never worked through one though, I admit). But check with an accountant, because getting it wrong will land you in a world of pain

[BlasterBates]

So, in my case, if I continue to work only up to 10 days a month in Germany, would it take up to 19 months to exceed 183 days in Germany? (Just a theoretical question - my contract may not even exceed 4 months as it stands now.) Is my understanding correct? Or is this 183 days within a calendar year and that it may never get exceeded?

You are actually taxable on all German sourced income regardless of how long you've been there. The 183 days has wider implications in that you are then resident in Germany and will be taxable on all income.

In your case the the potential (and I stress potential) tax bill will be based on the proportion of time you spend in Germany. Lets say you have a contract over 8 months and spend 50% of your time in Germany, then 50% of your earnings would be potentially taxable in Germany.

If you just come over for business meetings then this wouldn't classify as earnings.

Suffice to say keep your time in Germany to a minimum and perhaps spend half-a-hour with a German tax advisor just to make sure you don't fall foul of the regulations.

[Boo]

Hi Boo, what do you mean by reverse charge the VAT?

Can anyone else please confirm Boo's views? Thanks.

See here : VATPOSS14100 - Reverse charge: introduction

Basically you charge zero VAT on your invoice (keep the VAT line but make the VAT% and amount zero) then you add a magic incantation to the invoice something like the following :

Levy of VAT reverse charged to CustomerCo VAT Ref. CCnnnnnnnnnn in accordance with Article 196 of EU Directive 2006/112/EC on the common system of value added tax.

Where CustomerCo is the company you are delivering the software to / invoicing and CCnnnnnnnnnn is CustomerCo's VAT number (not YourCo's VAT number).

But the question I am raising is whether a normal agency is actually the "customer" in terms of VAT-ability because you are not actually delivering the software to AgencyCo but to CustomerCo (== ClientCo).

You will probably be best off asking HMRC via their helpline and I would try to get a written reply from them if I were you.

Hth,

Boo

[peterparker]

You are actually taxable on all German sourced income regardless of how long you've been there. The 183 days has wider implications in that you are then resident in Germany and will be taxable on all income.

In your case the the potential (and I stress potential) tax bill will be based on the proportion of time you spend in Germany. Lets say you have a contract over 8 months and spend 50% of your time in Germany, then 50% of your earnings would be potentially taxable in Germany.

If you just come over for business meetings then this wouldn't classify as earnings.

Suffice to say keep your time in Germany to a minimum and perhaps spend half-a-hour with a German tax advisor just to make sure you don't fall foul of the regulations.

Many thanks for your response.

Let me try to get some clarification. Assuming a person gets a IT contract through a UK recruitment agent and the client is in Germany. Again assuming the client lets the contractor work from home (in UK for example) for the entire contractual period except for business meetings onsite (assuming only up to max 5 days in a whole month and also assuming a few months no onsite visit in Germany), then they wouldn't classify as earnings?

[Boo]

You are actually taxable on all German sourced income regardless of how long you've been there. The 183 days has wider implications in that you are then resident in Germany and will be taxable on all income.

This is not correct and BB seems to have a perpetual blind spot that make him repeatedly misrepresent the situation :

Any EU company (yes even your little one-man-band contracting firm) has the right to send an employee (thet's you, even if you are also a director) to work in any other EU country for up to 183 days each year without entering into the tax system of the destination country.

This is a simple fact and it is a treaty obligation that even the mighty German nation must comply with. The Kings of Denmark and of Belgium have recently found out the truth of this, to their cost.

Boo

[peterparker]

See here : VATPOSS14100 - Reverse charge: introduction

Basically you charge zero VAT on your invoice (keep the VAT line but make the VAT% and amount zero) then you add a magic incantation to the invoice something like the following :



Where CustomerCo is the company you are delivering the software to / invoicing and CCnnnnnnnnnn is CustomerCo's VAT number (not YourCo's VAT number).

But the question I am raising is whether a normal agency is actually the "customer" in terms of VAT-ability because you are not actually delivering the software to AgencyCo but to CustomerCo (== ClientCo).

You will probably be best off asking HMRC via their helpline and I would try to get a written reply from them if I were you.

Hth,

Boo

Thanks a lot. I will certainly contact HMRC and will try to get a written reply from them. I will update the forum once I do.

[borderreiver]

Many thanks for your response.

Let me try to get some clarification. Assuming a person gets a IT contract through a UK recruitment agent and the client is in Germany. Again assuming the client lets the contractor work from home (in UK for example) for the entire contractual period except for business meetings onsite (assuming only up to max 5 days in a whole month and also assuming a few months no onsite visit in Germany), then they wouldn't classify as earnings?

IFAIK, if you're only in Germany occasionally for meetings, as you say for a maximum of 5 days a month, then I don't see how the German authorities could possibly claim any kind of tax residence.

Otherwise every other businessman travelling to DE from another country would need to be taxed there as well, which would be ridiculous.

[BlasterBates]

This is not correct and BB seems to have a perpetual blind spot that make him repeatedly misrepresent the situation :

Any EU company (yes even your little one-man-band contracting firm) has the right to send an employee (thet's you, even if you are also a director) to work in any other EU country for up to 183 days each year without entering into the tax system of the destination country.

This is a simple fact and it is a treaty obligation that even the mighty German nation must comply with. The Kings of Denmark and of Belgium have recently found out the truth of this, to their cost.

Boo

We've had a few postings from contractors who were in Germany for less than 6 months using their Ltd and were facing charges for tax evasion.

[jamesbrown]

This is not correct and BB seems to have a perpetual blind spot that make him repeatedly misrepresent the situation :

Any EU company (yes even your little one-man-band contracting firm) has the right to send an employee (thet's you, even if you are also a director) to work in any other EU country for up to 183 days each year without entering into the tax system of the destination country.

This is a simple fact and it is a treaty obligation that even the mighty German nation must comply with. The Kings of Denmark and of Belgium have recently found out the truth of this, to their cost.

Boo

This is a very misleading post on several levels. First, the 183 day rule is simply a definitive test on residency for tax purposes, which determines liability for taxation on worldwide income - it is not the only test and anyone considering working abroad would do well to take expert advice, as the the rules are complex, in general. In any case, you'd still be liable to pay German taxes on German-source income; that is, income originating from work performed in Germany. In general, there are different rules for earned and unearned income (e.g. salary versus dividends).

[BlasterBates]

Many thanks for your response.

Let me try to get some clarification. Assuming a person gets a IT contract through a UK recruitment agent and the client is in Germany. Again assuming the client lets the contractor work from home (in UK for example) for the entire contractual period except for business meetings onsite (assuming only up to max 5 days in a whole month and also assuming a few months no onsite visit in Germany), then they wouldn't classify as earnings?

I would agree that this probably wouldn't classify as earnings in Germany.